quick start - tradestation add-onsﬁnd that using tradestation is actually quite simple and...

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c02 JWBT445-Harris January 29, 2011 17:0 Printer: Yet to come

C H A P T E R 2

Quick Start

In This Chapter:

➤ Introduction➤ Pseudo-Steps➤ Detailed Steps➤ Conclusion

INTRODUCTION

You just spent a small fortune on trading software, data, and computers and you can’teven use it. Or you opened a hefty trading account with TradeStation just so you coulduse the software. You probably thought that getting TradeStation was the solution to

all your trading problems, not the beginning of them. You just want to trade, not to becomea programmer. Right? And now, with the new version, 9, it has been extended into a full-fledged programming language.

The first step I like to take with students is to show them how easy TradeStation reallyis to use. Because of the vast capabilities of the software, it can appear that the learningcurve is insurmountably steep. Broken down into the elementary steps, however, you willfind that using TradeStation is actually quite simple and straightforward. TradeStation reallyis the toolbox that lets you solve all your trading problems.

Just to show you how easy it can be, this Quick Start chapter will guide you throughthe steps of writing your first system, the associated indicator, and checking your profit orloss. I will not offer detailed explanation of the steps in this chapter. I just want you to havea template for success. Later, throughout the book, we will go over the details.

7

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8 TRADESTATIONTM MADE EASY!

It’s easy to get a computer to do something. It is not always easy to get it to do what youwant it to. Computers will do exactly what you tell them, no more, no less. The challengeis always in putting your thoughts into clear, logical steps that mean the same thing to thecomputer that they mean to you.

PSEUDO-STEPS

I like to use “pseudo-code” to sketch a map for myself. Writing the pseudo-code is essentiallydefining your goal and making an outline. Whenever I begin a new project, no matter howlarge or how small, I like to have a goal and an outline of how to get there. (This especiallygoes for driving, since I can get lost going home from work. In fact, I have GPS and printeddriving instructions from MapQuest.com when I’m going somewhere, just in case.) Without

a clearly defined goal and milestones, you won’t get there!

The pseudo-code for the process covered in this book might look something like:

1. Open TradeStation.

2. Open chart with data.

3. Open EasyLanguage PowerEditor.

4. Write indicator.

5. Put indicator on chart.

6. Write system.

7. Apply system to chart.

8. View system results.

9. If system results exceed CPCTM Index, then prepare to trade, else loop back to step 6and continue homework.

We will go through those steps now, one at a time.

DETAILED STEPS

Step 1: Open TradeStation

Opening TradeStation is as easy as 1, 2, 3, 4, 5.

1. First, double-click the TradeStation icon on your PC’s desktop (assumingyou have already installed TradeStation from CD or download). This icon will varyslightly depending on the version you are using.

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Quick Start 9

2. Then fill in your name and password in the pop-up box shown in Figure 2.1.

FIGURE 2.1 Login Screen

3. Now click the Logon button, or Live Trading button, or Simulated Trading button, toaccept and open either a blank workspace, or the workspace(s) previously opened.

4. If no workspace is open, simply use the sequence File → New → Workspace, andcreate a new workspace.

Step 2: Open Chart with Data

5. Now that you have an empty workspace, you need a chart showing data. So, click on theChart Analysis icon in the Vertical Toolbar on the left of your screen. It should look

like or . That will bring up a default chart with the default symbol.

That’s it. You’re off to the races.

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Now, to stay consistent with the data in this book, let’s display the symbol DIS (Disney).If you want to use the same time frame as I’m using, simply go to www.moneymentor.com/TSME/DIS.txt and download the data. From there you can import the data into TradeStation.Or, if you want to use current data, simply type the letters DIS and TradeStation will displaythe data it has for Disney.

By default, my version of TradeStation brings up a 5-minute chart. I want to display dailydata, so I simply click on the little clock in the horizontal toolbar near the top of the screen.

It looks like this: . Then select the Daily time frame from the pull-down menu.You should now have a chart that looks something like the one in Figure 2.2.

FIGURE 2.2 Your First Chart

Wasn’t that easy?If your chart shows up black, with white bars, don’t worry. I’ll teach you how to make it

look more like mine later on.

Step 3: Crank Up the PowerEditor (Open EasyLanguage)

All we need to do now is put these pseudo-programming steps into the computer (TradeSta-tion and EasyLanguage) code. To do this, we simply open the EasyLanguage PowerEditorand go to it. Right?

Well, not exactly. When you open a TradeStation chart, you are at a fork in the road.When you go to the EasyLanguage PowerEditor, you are at another fork in the road. Youmust make a choice. In the words of the famous Yogi Berra, “When you come to a fork in theroad, take it.” Let’s look at all the forks.

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Quick Start 11

If you are not already looking at the EasyLanguage PowerEditor, simply look again at

the Vertical Toolbar on the left, and click on the EasyLanguage icon. It looks like this: .

Or, in version 9, like this: . This will bring up a menu of choices: either Open EasyLan-guage Document, or New EasyLanguage Document. The “New.. .” selection has morechoices. As you can see if you hover over the selection, it will bring up lots more choices,shown in Figure 2.3.

FIGURE 2.3 Menu Sequence to Start a New Indicator

For now, choose the sequence New EasyLanguage Document → Indicator. This willopen a new blank window for you, upon which you can begin to type EasyLanguage Re-served Words, functions, variables, and general code. But before you can actually get to theblank window, you must give it a name and choose which programs it will be available to,and choose a template (or none) for the code it lays down.

It is sufficient to give it just a simple name and click OK. You’ll get something to beginworking with.

A note about naming conventions: There are already names of indicators from Ato Z in TradeStation. And, over time, you will download files from TradeStation.com andfrom vendors. How are you going to find your documents if you name them similarly? Tomake finding my files easy, I always start my EasyLanguage documents (indicators, func-tions, strategies, etc.) by prefacing them with my initials and an underscore. For instance,

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FIGURE 2.4 Naming Your Indicator

my moving average code would be named “sjh MovingAvg.” That way, all of my code endsup at the same place, and is easily identifiable. (See Figure 2.4.)

Next, we’ll see how to put some code in this blank window.

Routine Types Before writing our first code sample, you must know the different typesof routines available within EasyLanguage. There are several types of routines to choosefrom (and from time to time they add more), and they each serve a different purpose. In thisbook we will address only Functions, Indicators, PaintBars, ShowMes, and Signals. Thereare more routine flavors in EasyLanguage (EZL), but those are best left to the advancedEZL books.

Each of these routine types has its own set of requirements, as to inputs and outputs.And, each type of routine serves a unique purpose in TradeStation.

Let’s briefly look at two routine types, to give you an idea of what they are and how theyare distinguishable. The additional routine types will be covered more in depth in Chapter 4,Basic Use of TradeStation.

Indicator

An indicator plots data on a chart. For the moment, let’s go back to the Chart Window. Ifyou don’t already have a chart window open, with DIS daily data on it, then open a chart inyour TradeStation window, and put some data on it. Without data, you can’t have a chart,and without a chart, you can’t have an indicator.

Your chart still looks like Figure 2.5, from Figure 2.2 above.Now click on the Insert menu item and pull down to Indicator. Click (or use the ALT+C

control sequence). For this exercise, choose the “Mov Avg 1 line” indicator supplied with thesoftware (as seen in Figure 2.6), and click OK. (See Figure 2.6.)

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Quick Start 13

FIGURE 2.5 Your First Chart

FIGURE 2.6 Pull-down Menu

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Accept the default input parameters by clicking OK (Price = Close and Length = 9), sowe can get right to the issue at hand—plotting something on a chart. My chart now lookslike Figure 2.7 with the data and a smooth (thin) cyan line that sort of follows the data. That

cyan line is a plot. Of course, in this book the cyan line is gray.

FIGURE 2.7 Chart with a Moving Average Plot

The moving average line on this chart is very difficult to see. By default, it is a thin. solidline and is a light color. We can change all of that. But, for now we are going to keep movingforward; later we’ll enhance the look of the display.

Plot 1 . . . In olden times TradeStation allowed only four plots on one window. Nowadaysyou may have as many as 99 plots in any one indicator. You may base the plot on any of thefour elements of price (open, high, low, or close), and you may calculate just about anythingyou can imagine to be plotted. As your coding gets more sophisticated, you can manipulatethe plot by varying colors, line thickness, and other style aspects of the plot.

What about volume? That’s not considered part of the data of a bar. It is an indicator,plotted by inserting an indicator called Volume.

The Plot Reserved Word has the format:

PlotN(Expression[,‘‘<PlotName>’’[,ForeColor[,Default[,Width]]]]);

� where N may range from 1–99� Expression is the value or formula for the value to be plotted� PlotName in quotes gives the plot a textual name with which you can identify it later

and the rest of the values are optional and will be discussed later.

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Quick Start 15

One thing to keep in mind: While the software is versatile enough to allow 99 plots onone chart, you can’t realistically distinguish more than about 7, so don’t overdo putting plotson one chart.

Now let’s make some changes to our simple indicator.

Step 4: Write an Indicator

Previously you looked briefly at the EasyLanguage PowerEditor. You were confronted witha blank window and not a clue as what to do.

Let’s go back to that step and open the code for the simple moving average we placedon the chart in Figure 2.7. Here are the quick steps:

1. Click on the EasyLanguage icon and pull-down to Open EasyLanguage Document,from the vertical menu bar on the left of your screen.

2. Select Indicator from the Select Analysis Type selection box, as shown in Figure 2.8.

FIGURE 2.8 Open EZL Indicator

3. Scroll over and select the Mov Avg 1 Line indicator (see Figure 2.9) from the list ofindicator names, and click Open.

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FIGURE 2.9 Select Mov Avg 1 Line

4. TradeStation will open a new window with EasyLanguage code in it. The code, which isas yet undecipherable to you, looks like that in Figure 2.10.

FIGURE 2.10 Your First Look at EasyLanguage Code

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Quick Start 17

EasyLanguage code is composed largely of Reserved Words, arithmetic operators, vari-ables, inputs, and comments. The most significant line of code in this EZL document is:

Plot1[Displace] (Avg, ‘‘Avg’’);

The “Displace” variable is optional, so let’s take it out. Now the line just looks like this:

Plot1(Avg, ‘‘Avg’’);

Avg is the data we want plotted, one data point at a time. “Avg” is the name we giveto the data stream to identify it. That’s all there is to it. Except for one more, very importantpiece of information.

The semicolon tells EZL that our “sentence” is complete. Each complete thought, orsentence, or command (whatever you want to call it) must be terminated with a semi-colon (;).

If you forget to terminate your sentence with the semicolon, you will get an error mes-sage from EZL. Sometimes it will say you forgot the semicolon; sometimes it will tell you thatit a variable name is undefined; and sometimes it will say something else. It all just meansthat EZL cannot decipher your sentence until it comes to the next semicolon.

Don’t worry about the rest of the code. Most of it is extraneous, and is used for moreesoteric applications. The only code you need in your indicator is this:

inputs: Price( Close ), Length( 9 );

variables: Avg(0);

Avg = Average (Price, Length);

Plot1( Avg, ‘‘Avg’’ );

We can simplify the code even further, if we don’t yet care about variables and inputs.The most basic EZL code for a simple, one-line moving average is:

PLOT1(Average(C,9),‘‘MAV1’’);

Aside: Moving Averages In every seminar1 I teach I find that several people don’t knowwhat a moving average is. That’s OK. You probably only know that sort of thing if you are amath major or engineer or scientist of some kind. For those who don’t recognize this termi-nology, it will be explained in Chapter 5, Basic Math. Basically, just know that it is a string ofnumbers which are calculated by averaging together a selection of numbers and then movingforward in the list and averaging the next selection.

1My seminars are given in person and on the web, by arrangement and on occasion. The most popularseminar is called “Solving the Puzzle.” Other seminars are “Advanced EasyLanguage” and “TradeStationMade Easy.” All my seminars are for novice and intermediate traders.

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Conventions By convention, I like to put my initials in front of the name for all routines Iwrite. That way, when I search for my work later, it is all alphabetized under “sjh ” in a group,rather than being scattered among TS’s built-in indicators or indicators I have purchasedfrom TS solution providers. Therefore, I would likely name our new indicator “sjh MAV1.”You may name it anything you wish.

After making the above changes to your code, go up to File and pull down to Save As(see Figure 2.11). Look carefully, because there are other Save As commands to save yourworkspace and your desktop as well as your EasyLanguage Document.

Select Save EasyLanguage Document As. . . and give your document a new name.In the “Name” box type the name you have chosen for this indicator. You do not need to

fill in “Short name” or “Notes” at this time. Now click OK.

FIGURE 2.11 Mov Avg 1 Line

That’s it. You did it! Later on I will explain to you what all those strange words meant.For now, I just want you to see the process from beginning to end.

The only other thing you have to do is to Verify the code. That’s the next step.

Code Verification Before TradeStation will allow you to use a routine on a chart, itwants to make sure that you haven’t made any blatant coding errors. Thus, the EasyLanguagePowerEditor will check the syntax of your code for you, so you don’t spend tremendousamounts of time debugging.

To verify your code, you may either press the F3 key, click on the verify icon , oruse the File → Verify menu sequence. If your code is syntactically correct, TS will first say“Verifying” and then respond with “Verification Successful.” Back in the way back, Easy-Language used to respond with “Excellent!” and it was thrilling and encouraging. Once they

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Quick Start 19

became a securities company, it had to get rid of that response, as it might be misconstruedas an indication that your code might be profitable. Now it’s just a simple “Verification Suc-cessful,” not even an exclamation point.2

If your verify is not successful, go back and check each and every semicolon, space, andcomma until your code looks just like mine and your verify gives you “. . . successful.”

Now you have written an indicator with the PowerEditor.

Step 5: Putting an Indicator on the Chart

To see your new indicator, you need to put it on the chart. In the previous step we put abuilt-in indicator on your chart, just so you could quickly see what an indicator was. If youhaven’t already, take that indicator off your chart. You will do so by selecting the plot and

pressing the Delete key Delete .When you click on the indicator on your chart, be sure to place your cursor (the point of

the arrow) right on top of the indicator line. When you click, little black boxes will appear atintervals on the indicator (see Figure 2.12). This means that you have actually selected the in-dicator. If the little black boxes don’t appear, you haven’t yet clicked in exactly the right spot.

FIGURE 2.12 Chart with Built-in Indicator Selected

2It gets worse. With the very latest release of TradeStation, the company even has taken away the “Ver-ification Successful.” Now at the bottom of the screen, TradeStation responds blandly with “0 error(s),0 warning(s).”

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Pressing the Delete key while the black boxes are showing on the indicator will removethe indicator from your chart.

Now you can put your new indicator on the chart, using the Insert Indicator pull-downmenu shown in Figure 2.13.

FIGURE 2.13 Insert Indicator

Go to Insert on the upper, horizontal menu bar and pull down to Indicator and click.This will bring up a list of all the indicators available to you. Select the one we just createdand click on its name. This will place the indicator plot on the chart.

Experiment with taking that indicator off the chart and putting new indicators on thechart. With each indicator, take a look at “what is true” of the indicator in relationship to themovement of the underlying market. What happens to the indicator, for instance, when themarket changes direction? Is there anything that you could use to pinpoint highs and lowsor turning points?

Your chart window should now look like mine, shown in Figure 2.12. Again, the movingaverage is in subgraph two.

Step 6: Write a Strategy

A strategy could also be called a recipe, a map, a procedure, a system, or a method. A strat-

egy is an algorithmic approach to trading and does not involve guessing or intuition.A strategy, therefore, is a set of steps that are followed precisely each time you wish to

evaluate whether to buy or sell.

In TradeStation 4.0, a system is created in a single routine, which examines each andevery bar of your chart to see whether your buy or sell conditions are met. This routine iscalled a system in TradeStation 4.0.

In TradeStation 2000i, a system is called a strategy and can consist of one or moreroutines called signals, which are linked together to create the strategy. If you have been auser of TradeStation 4.0, at first this new mechanism will seem burdensome. However, after

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Quick Start 21

the first time you want to include (and separately test) multiple entry and exit possibilities,you will be thankful for the change.

In TradeStation 8 and 9, there is no system; there are only collections of strategies.When you insert a strategy on a chart, it brings you to a pop-up menu where you can selectstrategy components.

For the purpose of this instruction, we will address writing a system, writing a signal,and writing a strategy as the same thing, independent of the version of TS you are using.

Strategy A strategy contains buy and/or sell commands. We can create a strategyusing our simple, one-line moving average. For starters, let’s make a strategy that buys whenthe high price of a bar crosses above the moving average and sells when the low price of abar crosses below the moving average. Of course, we don’t yet know whether this systemwill make us any money; that’s what TradeStation is for.

The strategy would look like this:

IF H Crosses Over Average(C,9) THEN BUY;

IF L Crosses Under Average(C,9) THEN SELL;

Again, we can get lots more sophisticated than this, but keep your pants on; this is justthe Quick Start.

IMPORTANT Please note that later versions of TS have enhanced the SELL command toread SELL SHORT. If you use just the SELL without the word SHORT, you would have onlyone entry to buy with one exit to sell that position. For all users of the current version of TS,the strategy should look like this:


IF L Crosses Under Average(C,9) THEN SELL SHORT;

This strategy will buy and sell short, and buy and sell short with each crossing of themoving average.

To create a strategy, click on the EasyLanguage icon on the Vertical menu bar andselect New EasyLanguage Document → Strategy.

Now’s the time to use your naming convention to choose an appropriate name for yournew strategy. I’m going to call mine sjh S MovAvg1, where the S is for strategy. Place yourchosen name in the Name box and ignore the other box, see Figure 2.14.

Now click on OK to accept the new name, which opens a window with default strategycode in it. In this window we are going to program the new signal. You can examine the codethat EZL generates to learn about writing your strategy. That’s the way all programmers learnto code: by copying the code that someone before them wrote.

When you are through examining the default code, erase it by highlighting it all andpressing the Delete key. Now you’ll have a blank window on which to write your strategy.

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FIGURE 2.14 Naming Your New Strategy

Remember that we discussed rules for our system earlier in this chapter. Our rules are:

� Buy when the high price of a bar crosses above the moving average.� Sell when the low price of a bar crosses below the moving average.

In the blank window, in EasyLanguage, type in the code for this signal:


IF L Crosses Under Average(C,9) THEN SELL SHORT;

Verify the code using one of the three methods discussed earlier: Press the key,

click on the verify icon , or use the File → Verify menu sequence. If you have notmade any typographic errors, you should get the Verification Successful response from thePowerEditor.

What?! Your code doesn’t verify? Well, as of TradeStation version 7, the buy and sellcommands had something else added to them. To complete the strategy we must correct thestructure of the buy and sell commands. To do so, highlight the buy in your code and type in“Buy next bar at market”. To correct the sell command, type “Sell Short nextbar at market”. The other structure available to you is to buy or sell “this bar at close”.TradeStation now distinguishes between selling to close a position and selling to go short.

To create your trading system, you may want a collection of several strategies. Or,maybe not. Maybe you will program all of your ideas in one strategy. Whichever you choose,just remember that it is perfectly acceptable to combine several strategies together to forma system. In these examples, we will be putting all of the code for our systems into a singlestrategy.

Here we go. Let’s put the strategy on your chart.

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Quick Start 23

Step 7: Apply the System to a Chart

From the Insert menu, pull downward and select Strategy (see Figure 2.15).

FIGURE 2.15 Insert Strategy

A pop-up window will display the names of all of your available strategies. Scroll downand select yours (remembering what you named it), and then click on the OK button.

To bring up the next formatting window, double-click on the name of your strategy inthe Format Analysis Techniques & Strategies window (see Figure 2.16). This windowallows you to format your strategy by selecting values for the inputs and configuring theentry and exit markers. There are no inputs in this strategy (so far), so there will be nothingto select under that tab. Click on the Entries tab and select color and shape for your buyarrows. Click on the Exits tab and you will see that there is nothing there to deal with. Goahead and click on Calculation just to take a look, but for now ignore this section too. (SeeFigure 2.17.)

Click on OK to close this pop-up and then on Close to finalize the formatting of yourstrategy.

This sequence will place your strategy on the chart and mark the buys and sells with thearrows you have selected. It should look something like the chart in Figure 2.18, allowing fordifferences in color and shape of the arrows.

Step 8: View System Results

I don’t know about you, but it seems like we’ve come a long way. At least I have been doinga lot of writing. Are you tired too? Stand up, sing a song, do some push-ups, we’re about toget to the good stuff!

Now is the time to use the View → Strategy Performance Report menu sequence.With the chart with the strategy selected, use the sequence or press ALT+SHIFT+P. Theresultant screen will look like the one in Figure 2.19.

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FIGURE 2.16 Format Analysis Techniques

FIGURE 2.17 Formatting the Strategy

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Quick Start 25

FIGURE 2.18 Strategy on the Chart

FIGURE 2.19 TradeStation Strategy Performance Report

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This screen is the one all the work and sweat and tears comes down to. This is thewindow that tells it like it is. Many traders don’t want to see this screen; they would ratherhope, than to know the hard, cold facts. In my book, however, it’s better to use logic than“into-wishing.”

I’m here to tell you, it’s next to impossible to find a winning strategy. The fact that thisvery first system of ours shows positive returns is unusual. But then, that’s why I am writingthe book.

Step 9: Are System Results Acceptable?

If you have read my other books (Trading 101, Trading 102, Electronic Day Trading 101,or Getting Started in Trading) or have attended any of my seminars, you already know whatmy CPCTM Index is. If not, suffice it to say, for this Quick Start, that the product of

(Percent profitable) ∗ (Ratio avg win/avg loss) ∗ (Profit factor)

needs to be greater than 1.2 for me to start being happy with the performance of a system.In recent versions of TradeStation the stats needed are not all visible from the reduced

window; you need to scroll down to find all three numbers. Rather than print the wholewindow in this book, I’ll just tell you that in this example Percent profitable = 41.67%; Ratioavg win/avg loss = 1.47; and Profit factor = 1.13.

We can then calculate that (.4167) * (1.47) * (1.13) = 0.692 is not greater than 1.2. With-out this calculation, you might initially conclude that the system is profitable; but with CPC,you find quickly that this strategy is not robust enough to trade.

What does that say? Only that we have some more homework to do. More specifically,a low CPC says that this single moving average system is too simplistic to produce consis-tent profits in the stock we have just analyzed. Later in this book we will continually askmy favorite question: “What is true?” We will examine and refine this system by asking thisquestion again and again.

CONCLUSION

The beauty of this Quick Start is that all the steps are now outlined for you. That’s really allthere is to it. You have learned the basics of using TradeStation in record time.

In the chapters that follow, we will get deeper into tricks of the trade. We will learn howto write indicators and signals that are more complex. But each and every time you will startwith opening TradeStation and go through to checking the system results. We will just beadding layers of sophistication to the steps.

All too often I encounter novice traders who want to execute the steps once, and giveup in frustration if they haven’t found the answer by then. Notice that in the last step (Arethe System Results Acceptable?) I did not say to give up after finding low CPCs. I said wehave more homework to do. A low CPC is not yet cause for alarm, nor is it justification todeclare that a system doesn’t work. It is just time for more homework.

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